Even though American space company Rocket Lab Corp. (RKLB) is focused on launch systems, its stock price has been grounded as of late. In fact, the space pioneer lost half its market value over the past few months due to several adverse developments, including a notable increase in CapEx and a delay in the launch of the first Neutron rocket.
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However, this period of weakened investor sentiment may present an attractive entry point for long-term investors. Rocket Lab appears well-positioned to lead the global small-payload launch market and is steadily progressing toward competing in large-payload launch services as well.
The company is already demonstrating early signs of durable competitive advantages. I remain bullish on Rocket Lab’s long-term prospects and believe the market is undervaluing its growth potential in light of temporary setbacks.
Rocket Lab’s Scaling Efficiency and Expanding Backlog
A key driver of my bullish outlook on Rocket Lab is its steadily improving efficiency as the company scales. Although it has yet to reach profitability, the trajectory is encouraging. In Q3, revenue climbed 48% year-over-year to a record $155 million, while gross margin rose to an all-time high of 37%.
This marks a dramatic turnaround from the negative 34% gross margin reported in 2020. With revenue expanding from $35.2 million in 2020 to $555 million over the past 12 months, Rocket Lab’s margin expansion underscores how meaningfully the business has become more efficient at higher volumes.
The company’s expanding contract backlog further reinforces this trend. Rocket Lab continues to secure new business at an impressive pace—signing 17 new contracts in Q3 alone, bringing its total backlog to 49, the highest in its history.
The company has already completed 16 Electron launches this year, matching its 2024 record, and with additional missions slated for Q4, it is on track to set a new annual launch record in 2025. As of Q3, the backlog’s total value has surged 56% year-over-year to $509 million, positioning Rocket Lab for continued operating leverage and efficiency gains in the years ahead.
RKLB’s Strategic Diversification as a Form of Insurance
Rocket Lab’s ongoing diversification efforts have further reinforced my bullish outlook, as they open multiple new avenues for long-term growth. Branching out can serve as a de facto form of insurance for the firm and shareholders alike. After establishing itself as the global leader in small-payload launch services, the company is now targeting the more lucrative large-payload market. The Neutron rocket is central to this strategy.
While its inaugural launch has been pushed to 2026—originally planned for the second half of this year—the delay is unlikely to alter Rocket Lab’s long-term trajectory. The company has already been chosen as one of only five launch providers for future U.S. Space Force national security missions, underscoring confidence in its capabilities. Prioritizing thorough safety testing ahead of Neutron’s first flight is a prudent move, as a delayed but successful launch is far preferable to a premature failure.
Beyond large-payload delivery, Rocket Lab is aggressively expanding into the broader space systems market—a strategic play aimed at transforming the company into a comprehensive, end-to-end space solutions provider. Its long-term ambition is to manage the full spectrum of the space economy, from launch services to the support and operation of critical on-orbit missions.
RKLB is On Track to Capitalize
Rocket Lab’s expanding scale, rising efficiency, and strategic diversification are complemented by what appears to be a durable and widening competitive advantage. The company’s Electron rocket—its flagship vehicle for the small-payload segment—is now the most frequently launched small rocket in the world.
Rocket Lab is on track to complete more than 20 Electron missions this year, and over the past three years, it has averaged nearly 15 launches annually. By comparison, the second most active small rocket, China-based Galactic Energy’s Ceres-1, has averaged fewer than six annual launches over the same period. This sharp disparity in launch volume underscores Rocket Lab’s apparent dominance in the global small-payload launch market.
Recent developments suggest that this lead is only strengthening. On November 20, Rocket Lab announced plans to conduct two missions just 48 hours apart—a new milestone in the company’s launch frequency.
This accelerating launch cadence highlights Rocket Lab’s superior operational efficiency, and importantly, it has not come at the expense of mission quality: every Electron launch this year has been successful. By pairing reliability with rapid turnaround times, Rocket Lab is solidifying its position as the most efficient and dependable partner for government and commercial customers requiring small-payload delivery.
Is Rocket Lab a Buy, Sell, or Hold?
On Wall Street, RKLB stock carries a Moderate Buy consensus rating based on nine Buy, four Hold, and zero Sell ratings over the past three months. RKLB’s average stock price target of $65.17 implies approximately 62% upside potential over the next twelve months.
In my view, Rocket Lab’s investment appeal has actually increased following the recent market selloff. Despite the delay in the first Neutron launch, the company remains the dominant player in the small-payload market, diversification efforts are already delivering promising results, and financial performance is trending in the right direction.
Short-Term Volatility to the Rescue
Rocket Lab’s stock is being punished in the market due to short-term adverse developments. The company, however, seems well-positioned to grow exponentially in the long run and enjoy durable competitive advantages in a lucrative market segment. This makes the recent market rout a good opportunity for long-term investors to double down on Rocket Lab, in my opinion.